Fuel levy to go up by 30.5 cents a litre

Finance Minister Nhlanhla Nene proposed an increase of 50 cents a liter in the Road Accident Fund levy to 154 cents in the 2015/16 tax year

Nene said the increase is required to “finance the progress made by the RAF [Road Accident Fund] administration in clearing the claims backlog”.

“But it also reflects the unsustainability of the current compensation system, which has accumulated a R98 billion unfunded liability.

“Legislation to establish the new Road Accident Benefit Scheme will be tabled this year, to provide for affordable and equitable support for those injured in road accidents. Once the legislation has been passed, the levy will be assigned to the new scheme,” Nene said.

In line with expectations, the general fuel levy was also increased. The hike of 30.5 cents a litre will take effect in April.

Against the background of a considerably lower pump price and the hikes in levies, taxes as percentage of the pump price will rise from 27.6% for 93 octane petrol in 2014/15 to 40.9% in 2015/16 (see table below).

Source: National Treasury

Consumers have experienced considerable fuel price reductions over the last few months as a result of the lower oil price.

Data from the Automobile Association suggest that consumers now pay around 28% less for 95 octane fuel than they did in August last year.

But Figures from the Central Energy Fund indicate that consumers may already have to brace themselves for a fuel price hike in March as the under recovery on 95 octane is currently just over 90 cents a litre.